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Sustainability 2018, 10(1), 45; https://doi.org/10.3390/su10010045

Investment Promotion, Fiscal Competition and Economic Growth Sustainability

School of Economics and Management, Southeast University, Nanjing 210096, China
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Received: 6 December 2017 / Revised: 22 December 2017 / Accepted: 23 December 2017 / Published: 2 January 2018
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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Abstract

Local governments in China build development zones to attract investment. We develop a model of fiscal competition to examine investment promotion under centralization and decentralization. Our study shows that even when perfect information is not available, under the condition of an indivisible investment, a central government achieves the optimal investment in development zones and the best tax ratio for maximizing total welfare, whereas decentralized decision-making easily results in infrastructure overinvestment and tax erosion, which does harm to economic growth sustainability. View Full-Text
Keywords: fiscal competition; investment promotion; economic growth sustainability fiscal competition; investment promotion; economic growth sustainability
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Wu, B.; Xu, X.; Feng, Z. Investment Promotion, Fiscal Competition and Economic Growth Sustainability. Sustainability 2018, 10, 45.

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